AI stock concentration nears past bubble peaks
QQQ•Bank of America analysts said the 10 biggest AI stocks make up 42% of the market, within the 36% to 44% range where major bubbles have topped out. They said AI spending and semiconductor prices support a railroad-boom comparison, while rising Treasury yields point to risks.
1. AI stocks dominate market
The 10 biggest AI stocks now account for 42% of the market, Bank of America analysts led by Michael Hartnett said in a note. That share is within the 36% to 44% range at which major bubbles have topped out, from the 1920s through the dotcom boom in 2000; railroads reached 63% in 1881.
2. Railroad comparison
The analysts said the bull case rests on the idea that “it's the railroads this time.” AI capital spending is 3.5% to 4% of GDP, below the roughly 5% peak in the railroad era, and semiconductor prices are soaring, they said.
3. Yields pose a risk
The railroad boom occurred while Treasury yields were falling and ended amid credit and liquidity crises. Today, yields are rising, with zero-coupon bonds down 15% in the third quarter, the analysts said.
